The pros and cons of increasing pay transparency

A recent survey by Indeed has revealed that 56% of UK workers would be in favour of greater pay transparency if it meant this would help eliminate unfair pay practices.

Whilst private sector companies with 250 or more employees are required to publish a gender pay gap report each year, there are currently no further obligations when it comes to pay transparency. Critics suggest the information provided in gender pay gap reports can be difficult to interpret and have instead called on employers to be more transparent over pay practices by disclosing this information to the general public.

From an employer’s point of view, publically disclosing salaries can help attract attention to an organisation and enhance its appeal. Naturally, those who offer competitive salaries will benefit the most from this, as pay will always prove an important factor when it comes to recruiting and retaining top talent. On the other hand, disclosing this information may decrease an organisation’s appeal and encourage staff to look for work elsewhere if they discover that they are being paid below the market rate for their role.

As mentioned, pay can be a powerful motivator and employers may be inspired to go the extra mile at work if they can see the salary they are set to receive should they qualify for a promotion in the future. However, this may cause more disruption at work, especially if a there proves to be a disproportionate gap in the wages offered for certain positions.

Some employers actively look to discourage any discussions of salaries at work, implementing pay secrecy clauses to prevent this. However, there are arguments to suggest publicly disclosing salaries may reduce the likelihood of staff speculating on the issue, thereby ensuring productivity and morale remain high. Alternatively, having this information readily available may simply encourage workplace discussions about pay, potentially resulting in an increase in grievances and equal pay claims from disgruntled employees who believe unfair pay practices are in place.

Organisations often struggle with unconscious bias when it comes to offering salaries during recruitment, allowing pre-determined ideas on issues such as gender and age to influence their decisions. Whilst there are certain measures to avoid this, public scrutiny of salaries could be another way to keep on top of unconscious bias by making employers more aware of their behaviour during the recruitment process.

Also, keep in mind that opting to make individuals’ salaries public could have implications when it comes to the general data protection regulations (GDPR). As it is not a legal requirement organisations may struggle to provide a lawful basis for publishing this information. Therefore, jobs could be categorised using a clear and anonymous banding system, giving staff a good idea of what salary accompanies each job role without sharing any unnecessary personal data.

Whilst the debate around greater pay transparency will continue, employers should consider the pros and cons of this practice. Given the recent developments in employment law it is not difficult to envisage this becoming a requirement in the future, however until then employers should determine for themselves if this will be suitable for their organisation.

Suggested Resources